26 of Gen Xers agreed with this statement: “I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date.” Moody’s actuarial math concluded that a modest draw down would cause pension fund liabili- ties to soar owing to a depletion of reserves.188 There is a bill going through Congress to allow public pensions to borrow from the treasury; they are bracing for something.189 This is a tacit bailout being structured. The Fed cowers at the thought of a recession with good reason: Can the system endure 50% equity and bond correc- tions—regressions to the historical mean valua- tion? What happens when monumental claims to wealth—$200 trillion in unfunded liabili- ties—far exceed our wealth? Laurence Kotlikoff warned us; we are about to find out.190 Beware of any thinly veiled claim that the redivision of an existing pie will create more pie. My sense is that we are on the cusp of a phase change. Stresses are too large to ignore and are beginning to cause failures and welched promis- es. Runs on pension funds akin to runs on banks would be deadly: people would quit working to get their pensions. At this late stage in the cycle, you simply cannot make it up with higher returns. Enormous appreciation has been pulled forward; somebody is going to get hosed. It’s only fourth grade math. Bankruptcy laws exist to bring order to the division of limited assets. We got into this mess one flawed assumption at a time. On a final note, there is a move afoot to massive- ly reduce contributions to sheltered retirement accounts. This seems precisely wrong. (I have routinely sheltered 25–30 percent of my gross income as a point of reference.) Congress is also pondering new contributions be forced into Roth-like accounts rather than regular IRAs. I have put a bat to the Roth IRA both in print191 and in a half-hour talk.192 Here is the bumper sticker version: • Roth IRAs pull revenue forward, leaving future generations to fend for themselves; • Fourth grade math shows that Roth and regular IRAs, if compounded at the same rate and taxed at the same rate, provide the same cash for retirement. • Roth IRAs are taxed at the highest tax bracket—the marginal rate—whereas regular IRAs are taxed integrated over all brackets—the effective tax rate. If you read a comparison of Roth versus regular IRAs without reference to the “effective” versus “marginal” rate, the author is either ignorant or trying to scam you. Phrases like “it depends on your personal circumstances” are double-talk. This synopsis of a Harvard study has two funda- mental errors: Can you find them? “If a worker saves $5,000 a year in a 401(k) for 40 years and earns 5% return a year, the final balance will be more than $600,000. If the 401(k) is a Roth, the full balance is avail- able for retirement spending. If the 401(k) is a traditional one, taxes are due on the balance. Let’s say the person’s tax rate is 20% in retire- ment. That makes for a difference of $120,000 in spending power, which a life annuity will translate into about $700 a month in extra spending.” –JOHN BESHEARS, lead author of a Harvard study Footnotes: 166. http://www.zerohedge.com/news/2017-05-26/ global-pension-underfunding-will- grow-400-trillion- over-next-30-years-world-economic 167. https://en.wikipedia.org/wiki/Defined_bene- fit_pension_plan 168. https://www.amazon.com/Sapiens-History-Hu- mankind-Yuval- Harari/dp/0062316095/ref=s- r_1_1?s=books&ie=UTF8&qid=1513355290&sr=1- 1&keywords=sapiens 169. https://twitter.com/MarkYusko/sta- tus/878459053760012288 170. http://www.mauldineconomics.com/frontlineth- oughts/uncle-sams-unfunded- promises/ 171. https://www.cnbc.com/2014/09/26/us-public- pension-gap-at-least-2-trillion- moodys.html II. THE STATE OF OUR PENSION FUNDS “Almost half of Gen Xers agreed with this statement: “I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date.”